“2012 has seen the UK PRN system severely tested again,” said Steve Gough, Valpak’s CEO.
“A combination of factors came together to cause some major issues in the market place – two years of flat targets, glass reprocessor fraud, tough economic conditions, downturn in exports for some materials and generally difficult trading conditions for us and our members.”
“With this in mind, we are delighted to announce that Valpak has fully complied for 2012. We would like to thank our members, reprocessors and our staff for the efforts and understanding during what has been one of the most challenging compliance periods in our 15 year history.”
The main issue in 2012 has been glass, which showed much lower levels of reprocessing during the first 3 quarters of the year than previously. Once problems such as this are uncovered, it is the job of the PRN system and compliance schemes to tackle the pinch points and correct the market failure.
Defra projected 2.767mT of glass packaging sales onto the market in 2012. To ensure the UK meets the EU target of 60% glass recycling target, UK obligated businesses needed to acquire 1.7mT (425kT per quarter) of glass recycling evidence. The first three quarters of the year showed reprocessing at much lower levels than the required quarterly rate, leaving an extremely challenging 565kT to achieve full compliance in the final quarter. To stimulate this growth, responsible schemes have had to significantly increase the financial contribution they inject through PRNs, meaning that many producer members have had unexpected and sharp rises in their compliance costs. Valpak has been pleased to see that whilst this has been uncomfortable, many producers recognise that over time the system still delivers compliance at low cost, and it must be able to react to market fluctuations as does any commodity market.
Valpak believe that another key factor in achieving compliance has been through responsible schemes creating and following robust operational plans. Each scheme must submit an operational plan to the Environment Agencies detailing how they will deliver compliance, the strategy to acquire evidence and contingency plans in the event of contracts failing. In previous years, when targets were relatively straightforward to achieve, these documents may have been thought unimportant and merely an unnecessary administrative formality. However, 2012 was different.
“This year has shown the importance of adhering to some key elements of operational plans, for example steady acquisition of evidence through the year and contingency planning. It may be that proposals to remove or relax the requirement for these plans should be reconsidered”, stated Steve Gough.
“It is the combination of strong management of the operational plan, together with the efforts and understanding of our reprocessors and members who all take their responsibilities very seriously, that has delivered sufficient glass evidence to ensure Valpak’s compliance for 2012. We always aim to create realistic plans, and then follow them wherever possible. As an example of that process, we were able to release some slight surpluses of glass evidence that our reprocessors have been able to produce back into the market to assist other producers and schemes.”
“We believe that UK reprocessing in glass in the fourth quarter is well over 500kT and demonstrates that the capacity exists to handle the required future tonnages on a quarter by quarter basis, despite the trend towards mixed colour/comingled collections.”
“In fact, we are aware that at least 14kT of evidence produced in 2012 was not required by obligated producers and was carried over into 2013. The remaining question is whether sufficient material is being collected overall now that the fraudulent activity of one or two parties has been removed and the system and has had time readjust.”
Valpak understands that a number of producers have considered whether or not the cost of complying in 2012 was acceptable and may have decided to simply not pay the costs and hope the repercussions are less costly than complying legally. The agencies and Government will need to consider the implications of this, particularly as we face very challenging plastics recycling targets over the next 5 years.
Steve Gough stated:
“Something that Valpak has been suggesting in the packaging regime for a number of years is the concept of a “compliance fee”, or a “penalty fee”, if evidence is not available after reasonable efforts have been made. There is real concern that some parties may be choosing to drop out from the packaging regulations when the costs rise and will claim that evidence was simply not available. If there is no alternative then these businesses will have gained a significant commercial advantage over their competitors who have done the responsible thing.”
These are points that Valpak has, and will be continuing, to make to Government and regulators over the next few weeks and months.